Vietnam steel plants, electric company clash over power shortage

Sep 7, 2010, 9:31 GMT

Hanoi - The head of Vietnam's steel association Tuesday rejected a proposal by the national electric company to require steel factories to build their own power plants rather than drawing from the national grid.

The two industries are in a literal struggle for power, as demand for Vietnam's subsidised electricity is rising faster than it can bring new power plants on-line.

Last week, the national power monopoly Electricity of Vietnam (EVN) asked the government to require that any new steel plants with power needs greater than 100 megawatts build their own generators.

EVN general director Pham Le Thanh said the country's fast-growing steel industry was partly responsible for rolling blackouts that swept Vietnam this summer. EVN estimated the steel sector consumed 3.5 billion kilowatt-hours (kWh) per year, out of the country's total production of 90 billion kWh of electricity in 2009.

Thanh also said three-quarters of the country's steel plants had been built without approval from its national steel production plan, disrupting EVN's efforts to plan power production.

But Vietnam Steel Association chairman Pham Chi Cuong disputed EVN's figures, and said requiring plants to build their own power supplies would scare off foreign investment.

EVN says foreign investors are taking advantage of Vietnam's subsidised energy, which at under 5 US cents per kWh is considerably cheaper than elsewhere in the region.

An official at the Vietnam Energy Association, who asked not to be named due to the sensitivity of the issue, called EVN's proposal 'very illogical.'

'No one will want to invest in steel projects if the proposal is approved,' the official said. 'The way to solve the power shortage is to increase the price of electricity, and to attract foreign investment.'

Electricity demand in Vietnam is rising at 15 per cent per year. The 2.5-gigawatt Son La dam comes on-line in December, and the country expects to quadruple its coal-fired generating capacity by 2015. Vietnam also plans to construct two nuclear power plants by 2020.